January 1st, 2023 marked not only the beginning of a new year but the beginning of a two-year ban on the purchase of residential property by non-Canadians.
Now that regulations under the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) have been in effect for several months, you may wonder how this and recent amendments may impact purchasing decisions for home buyers. To aid you in understanding the ins and outs of this Act and how it may affect your role in the real estate market, we have outlined the most important information that real estate professionals and home buyers need to know as they begin their search!
What is the Prohibition on the Purchase of Residential Property by Non-Canadians Act?
The Government of Canada passed the Prohibition on the Purchase of Residential Property by Non-Canadians Act on December 2, 2022. This was followed by the Regulations, which outline how the Act operates.
Both the Regulations and the Act came into effect on January 1st, 2023, starting a two-year period where individuals who are considered non-residents of Canada are prohibited from buying residential property either directly or indirectly. Amendments were released on March 23, 2023, clarifying who can and cannot purchase Canadian residential real estate during this two-year period.
Who is considered a non-resident of Canada?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act applies to non-residents of Canada, meaning an individual who is:
- not a Canadian Citizen;
- not a person registered as an Indian under the Indian Act; and,
- not an individual identified as a permanent resident.
The Act also prohibits certain corporations from purchasing residential property. Visit the CMHC website to learn about the impacts this Act will have on corporations.
Who is exempted from the prohibition?
Whether you are a non-resident of Canada looking to buy a house, a real estate agent looking to answer your client’s questions, or a broker trying to assist someone in getting a mortgage, it is important to know the circumstances where non-Canadians would be exempted from the prohibition and able to buy a home in Canada.
Work Permit holders:
The March 23rd amendments stipulated that work permit holders and those authorized to work in Canada can be exempt from the Act if they can prove they have 183 days or more remaining on their work permit or work authorization when purchasing the home and have not purchased more than one residential property.
Refugees, Refugee claimants and individuals fleeing international crisis:
Individuals who have been given refugee protection, have made a claim for refugee protection, or have received temporary resident status based on the Immigration and Refugee Protection Act are exempt from the Act.
Accredited members of foreign missions in Canada:
If an individual holds a passport issued by the Chief Protocol of Canada and is a valid diplomatic, consular, official, or special representative acceptance passport, they are exempted.
Non-Canadians who are spouses of or common law partners of Canadian Citizens:
You can still buy property if you are a common-law partner or married spouse to an individual for whom the prohibition does not apply.
Temporary residents studying in Canada:
Temporary residents who are studying in Canada may be exempt from the prohibition if they meet certain requirements. For details, visit the CMCH website.
What does the Prohibition on the Purchase of Residential Property by Non-Canadians Act mean by Residential Property?
The Act defines residential property as buildings with three dwelling units or less. This includes semi-detached houses and condominium units. Until December 31, 2024, individuals prohibited under the Act will be unable to purchase homes that fall under this category.
The Act does not prohibit the purchase of larger buildings with four or more dwelling units.
Exceptions to the rule:
As with many rules or regulations, there are certain situations where non-Canadians will be able to obtain a residential property during the prohibition. These include:
Development:
The amendments on March 23rd allow non-Canadians to purchase land for development. This means that individuals who are otherwise prohibited from purchasing property under the Act can:
- Purchase vacant land zoned for residential or mixed-use development.
- Purchase residential property for the purpose of development.
Acquiring a property:
Should a non-Canadian acquire a property due to divorce, separation, gift, or death, the Act will not apply, and the individual can assume ownership of the property.
Creditor:
If a non-Canadian creditor must exercise their security interest or secured right to foreclose or seize property, the Act will not apply.
Rental of a dwelling unit:
Under the Act, non-Canadians are allowed to rent and occupy units for residential use. Rentals are not considered purchases and won’t be prohibited.
Does the Prohibition on the Purchase of Residential Property by Non-Canadians Act impact my ability to sell my property as a non-resident?
Although non-residents cannot buy property during this time, those who own existing property can still sell. However, there are several items non-residents will need when selling their Canadian property. These include:
- Clearance certificate to sell;
- Withholding tax;
- Canadian Tax Return;
For more information on selling your home, please contact one of our Top law Firm real estate lawyers.
Legal impacts of the Prohibition on the Purchase of Residential Property by Non-Canadians Act
You may be wondering how the Prohibition on the Purchase of Residential Property by Non-Canadians Act would impact you as either a real estate professional, non-resident, or Canadian citizen.
Penalties for real estate professionals
Although real estate professionals are not responsible for upholding the prohibition, they can be liable to penalties and fines for helping a non-resident purchase a property.
It is important for real estate agents, lawyers, financial professionals and brokers to understand the Act to fulfil their professional duty to clients and protect their businesses. Please contact a lawyer if you are unsure if this Act would prohibit your client from purchasing a property.
Penalties for non-residents
If you are a non-resident who purchases a house during the prohibition, this would be considered a criminal offence and could lead to charges by law enforcement. You will also be subject to a fine of not more than $10,000 CAD.
Should a non-Canadian be convicted of purchasing a home during the prohibition, the home will be sold, and the individual will receive no more than what was paid for the property.
Penalties for individuals
If you are found aiding and abetting an individual prohibited from purchasing a property under the Act, you will be subject to a fine of not more than $10,000 CAD.
Should you sell a property and the buyer is discovered to be prohibited from the purchase, they will still be obligated to fulfil the purchase and sale agreement.
The Top Law Firm: Client-Driven Service
At The Top Law Firm, we believe that our role goes beyond processing your transaction – our job is to work with our clients and referrals to provide them with the information they need to know when buying and selling homes in Ontario.
If you have questions about a piece of real estate legislation, the buying process, or any real estate matter – we want to be your first call! Contact us today and get a team of “Top” lawyers behind your real estate transaction.